Preferential Trade Areas, Multinational Enterprises, and Welfare

23 Pages Posted: 8 May 2006

See all articles by Priya Ranjan

Priya Ranjan

University of California, Irvine - Department of Economics

Abstract

The effects of preferential trade areas (PTAs) on the investments by multinational enterprises and their implications for the welfare of members and non-members are studied in a model with two types of firms: national firms and multinational firms. In the presence of multinational activity PTAs can create new investment as well as divert investment from non-members to members. Both affect the welfare of members positively. More interestingly, if the investment creation effect of a PTA is sufficiently strong, then the PTA could be welfare enhancing for non-members as well.

Suggested Citation

Ranjan, Priya, Preferential Trade Areas, Multinational Enterprises, and Welfare. Canadian Journal of Economics, Vol. 39, No. 2, pp. 493-515, May 2006. Available at SSRN: https://ssrn.com/abstract=899644 or http://dx.doi.org/10.1111/j.0008-4085.2006.00357.x

Priya Ranjan (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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